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VIPsight

Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.
     

VIPsight International


Article Index

 

Politics

 

Airbus and Bombardier counteract on anti-liberal measures of the US government

Airbus announced the acquisition of a majority stake in the C Series Aircraft Limited Partnership. This transaction combines Airbus´ infrastructure and capacities with Bombardier´s newest aircraft family in the 100-150 seat market.

The C Series Aircraft Limited Partnership headquarters and primary assembly will remain in Quebec, while a second, final assembly, line will be established in Mobile, Alabama. The transaction helps Airbus to widen its product range by adding a very attractive segment at relatively low investment costs. Meanwhile, Bombardier is expecting to neutralize the effects of punitive tariffs announced by the US government. At the same time, it could help to reduce the threat of a severe backlash for Boeing due to the introduction of the punitive US tariffs. For example, the UK government recently warned that Boeing could lose UK defense contracts as a consequence of the tariffs, which now may have become redundant.

The transaction is a clever move by Airbus and Bombardier; joining forces to optimize results in a growing and attractive market segment. But it also may have been fostered by the announcement of punitive US tariffs, thus highlighting the risks created by imprudent government actions for US companies with international activities such as Boeing.

 

Black and Grey: The EU Publishes Its Lists of Tax Havens

by Gibson Dunn

On Tuesday, December 5, 2017, the EU announced its long-awaited list of seventeen "non-cooperative" tax jurisdictions (the "Black List") and identified a further 47 jurisdictions with whom discussions about tax reform are ongoing (the "Grey List").  The countries identified in both lists were among a number of jurisdictions invited by the EU to engage in a dialogue on tax governance issues in early 2017.  The Black List identifies jurisdictions that failed to engage in a meaningful dialogue with the EU or to take action to address deficiencies identified in their tax practices. The Grey List identifies jurisdictions whose tax policies and practices continue to present concerns but which have committed to address issues raised by the EU.

The origins of the list date back to a European Commission Recommendation from 2012, which was followed by detailed assessment work carried out since June 2015, pursuant to a published Commission action plan.

The EU has not announced any immediate steps to be taken against the blacklisted jurisdictions and instead has deferred to EU member states to take action.

The jurisdictions on the Black List are:

American Samoa   Marshall Islands   St Lucia  
Bahrain   Mongolia   Samoa  
Barbados   Namibia   South Korea  
Grenada   Palau   Trinidad & Tobago  
Guam   Panama   Tunisia  
Macau       United Arab Emirates  

In its announcement on December 5 the EU noted that these seventeen jurisdictions had "taken no meaningful action to effectively address the deficiencies [identified by the EU in relation to their tax legislation and policies] and do not engage in a meaningful dialogue…that could lead to…commitments" to resolve issues raised. The EU confirmed that the jurisdictions will remain on the Black List until they meet certain criteria it identified in a publication of November 8, 2016 in relation to tax transparency, fair taxation, and the implementation of the OECD Base Erosion and Profit Shifting (BEPS) package.

In addition the EU published a Grey List containing a total of 47 other jurisdictions, and identified one or more specific ongoing concerns in relation to each of those jurisdictions.

The jurisdictions on the Grey List are:

Armenia   Guernsey   Niue  
Aruba   Hong Kong   Oman  
Belize   Isle of Man   Peru  
Bermuda   Jamaica   Qatar  
Bosnia and Herzegovina   Jersey   Saint Vincent and Grenadines  
Botswana   Jordan   San Marino  
Cape Verde   Liechtenstein   Serbia  
Cayman Islands   Malaysia   Seychelles  
Cook Islands   Maldives   Swaziland  
Curaçao   Mauritius   Taiwan  
Faroe Islands   Montenegro   Thailand  
Fiji   Morocco   Turkey  
FYR Macedonia   Nauru   Uruguay  
Georgia   New Caledonia   Vanuatu  
Greenland       Vietnam  

In its conclusions on the Grey List the EU described these 47 jurisdictions as presenting concerns in relation to the criteria published on November 8, 2016 referred to above, and noted that it will continue to monitor the implementation of agreed steps to address the identified deficiencies. The stated purpose of the Grey List is therefore to act as a spur to continuing reform and progress in these jurisdictions.

Having expressed its sympathy for jurisdictions hit by the severe hurricanes in the Caribbean this year, the EU has put its screening process for eight Caribbean jurisdictions on hold.  These jurisdictions are: Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, Saint Kitts and Nevis, the Turks and Caicos Islands, and the United States Virgin Islands. Contacts with those jurisdictions will resume by February 2018, with the screening process in relation to those jurisdictions to be completed by the end of 2018.

While there is much to debate and dispute as to the allocation of jurisdictions to these lists, it should also be noted that the EU excluded from consideration EU member states themselves. This spares from consideration Gibraltar, as it is (pending BREXIT) formally part of the EU. After BREXIT there will be no bar to the United Kingdom or Gibraltar being considered for inclusion on either list.

In the run up to the publication of the lists, there was much speculation as to the sanctions and punishments that the EU would impose on jurisdictions included in the Black List. It had been suggested the EU could impose an EU-wide withholding tax on financial transfers into such jurisdictions, as well as a transfer tax on transfers out of those jurisdictions. While such measures may be adopted if the European Commission considers blacklisted jurisdictions to be continuing to be non-cooperative, in the short term the EU has decided to leave the question of the imposition of sanctions to the individual EU member states themselves.

This decision undercuts one of the stated purposes of the Black List – namely that of replacing the existing patchwork of national measures against non-cooperative jurisdictions with a coordinated approach by the EU. Nonetheless, inclusion on the Black List signals the EU's view that a particular jurisdiction fails to comply with tax good governance standards. This carries with it a measure of reputational damage for the jurisdictions in question vis-à-vis investors.

Clients and friends operating in the United Kingdom or in Europe may well have become familiar during the course of this year with the need to conduct a "risk assessment" for the purposes of complying with the EU's Fourth Money Laundering Directive (implemented in the United Kingdom, for example, by The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017). One of the risks to be assessed as part of such work is "geographic risk", with the assessing body required to take into consideration published views of international bodies. The publication of the Black List and Grey List should now be taken into account in the conduct, or periodic review, of that risk assessment. Those conducting risk assessments may need to consider the appropriateness of enhanced due diligence for entities incorporated in, doing business in, or with links to jurisdictions included on either list.

Clients and friends operating in the United Kingdom may also have completed, or be embarking on, a similar risk assessment under the United Kingdom's Criminal Finances Act 2017 regarding the "failure to prevent the facilitation of tax evasion" offences. Our recent  client alert on these offences can be found here. Again "geographic risk" forms part of such assessments. As in the AML sphere, best practice will be to take account of the EU's Black  List and Grey List in the conduct of, or periodic review of, such a risk assessment. Operations in these jurisdictions (especially those blacklisted) or work relating to these jurisdictions may require enhanced scrutiny as part of any risk assessment, and, where necessary, possibly enhanced controls or training as part of the implementation of "reasonable prevention procedures".

When it comes time to update a company's Bribery Act risk assessment, again the impact of these lists should be considered as part of that process.

Finally, it is worth noting that these designations are relevant only with respect to the EU. In the United States, for example, no such list has been proposed to date, and the imposition of sanctions by EU member states is not expected to have any direct US legal or tax consequences for entities from the blacklisted jurisdictions.

We will continue to monitor developments and will provide an update when the EU makes its decision in 2018 on eight outstanding Caribbean jurisdictions.